…they provide no documentation as to how their algorithm produces this indicated value… I had to “jump in the pool” and see what these bifurcated appraisals are all about. The names have been withheld to protect the guilty. I recently completed a “bifurcated” report for one of the AMC’s providing this type of service. The form is to be completed on their site and they recently upgraded to the “new and improved” report on their portal as of January 1, 2019. The subject is sited in an urban location and while not an anomaly per se, does display features such...
The concept of a third party providing one or more functions in an appraisal assignment is nothing new. Back in the 1970s and 1980s there were plenty of appraisers who used somebody else to do the sketch or to take the pictures or to pull comps. The “appraiser” put all of the pieces together and signed the report. Then came USPAP in 1989. Licensing followed shortly thereafter. Today, there are a number of lenders and AMCs who believe that they’ve invented something no one else has ever considered. The bifurcated or hybrid appraisal process. To be clear, we’re not talking...
Many of you are aware that the GSE’s are in the process of evaluating the entire appraisal process, including the existing ‘forms.’ This initiative was announced in 2nd Qtr 2018, and reps from both FNMA and FrMac made presentations at various appraiser conferences and other places through the year to gather info and suggestions from all appraisal forms users. This new initiative was never intended to be an immediate make-over; instead, the GSE’s said it was to be an approximate 3 year process. In December 2018, the GSE’s released their Executive Summary (see PDF below) describing what’s been accomplished so...
Algorithms are everywhere… “Algorithms decide who gets a loan, who gets a job interview, who gets insurance and much more — but they don’t automatically make things fair. Mathematician and data scientist Cathy O’Neil coined a term for algorithms that are secret, important and harmful: “weapons of math destruction.” Learn more about the hidden agendas behind the formulas.” “Algorithms are opinions embedded in code. It’s really different from what you think most people think of algorithms. They think algorithms are objective and true and scientific. That’s a marketing trick. It’s also a marketing trick to intimidate you with algorithms, to...
Bank regulators are nearing a decision to raise residential real estate transactions appraisal threshold to $400,000 from $250,000, for certain transactions. Perhaps it should be set to $2 Million, or $5 Million. It strikes me that we have two separate taxpayer regulatory/administrative/quasi-governmental organizations working in opposition. On one hand we have the Appraisal Subcommittee and The Appraisal Foundation (TAF), and 50+ state organizations attempting to regulate, license, and control the education of appraisers. USPAP, (Uniform Standards of Professional Practice) is promulgated by the Appraisal Standards Board (ASB) of the TAF. USPAP compliance is required for federally related transactions. USPAP comprises two parts:...
The current and proposed revised version of USPAP also opens the door to increased regulatory persecution of licensed and certified real estate appraisers, while leaving all others that opine about values with no constraints, rules or limitations. I was recently asked to consider a proposed change to USPAP. As received in my email: “Also this, in the 3rd exposure draft 239 The appraiser is not required to title an appraisal report using specific terminology because 240 USPAP compliance is measured by the substantive content of a report, not by what the 241 report is called. The use of labels such as analysis,...
How can using such a contractor not be a violation? In the context of a real estate appraisal, especially a residential real estate appraisal for a lender thru an AMC, what is confidential? First, look at USPAP’s definition of confidential information (lines 105 – 108 in the 2018-2019 edition). It says “confidential information [is] information that is either…identified by the client as confidential when providing it to an appraiser and that is not available from any other source; or…classified as confidential or private by applicable law or regulation” (ibid; emphasis added). Notice confidentiality flows to the client, not to any...
Skeptical skeptics are a rare breed. But growing in number… Different appraisers have different attitudes! Some have a lot of experience, others a lot of education. Others emphasize the ‘art’, while others consider themselves ‘quants’. Let’s put aside the ‘art’ versus ‘science’ discussion, where the artists say: “No computer will ever replace the appraiser”, or “No amount of education will ever replace experience”. The other side seems a bit confused. There are traditionalists. And there are the “advanced” appraisers. And there are the “vocational” appraisers, who don’t seem to care much about all of this. They just want to push through as many reports as possible. The skeptics tend to doubt...
…complete elimination of appraisal as part of their fully automated loan processing objectives… Our work as appraisers & appraisal issue advocates is certainly cut out for us all in 2019. I think appraisal unity is going to be needed if we are all to take on the adverse issues affecting us. That includes AI. They still have a large number of honest, & competent members. I think the rest of us will have to let AI take care of AI issues. I’m not averse to butting heads with them on specific issues when necessary but alienating them rather than seeking...
Appraisers, this is another essay written about a report I have ‘observed.’ I’ve mentioned before that I “come in contact with” appraisal reports from a variety of sources. Those that I determine have significant issues I write about. Conclusions about the ‘real value’ will be disclosed below. Trigger points for having reports formally reviewed are discussed. I do this because a majority of appraisers do not participate and interact with their peers on a consistent basis, and therefore may not get exposed to items that clients and lenders see in reports, which they question. I believe it’s important to expose items in reports that...
